On high ground Container Corporation of India - The Smart Investor

Container Corporation of India
Set to further expand its inimitable moat
Competitive intensity abating; emerging as a total logistics player
• By virtue of its legacy low cost pan India strategic assets, CCRI enjoys an inimitable resource
advantage over its peers, which is steadily increasing with time.
• None of the 15-odd new players that have entered since the container train operation
(CTO) industry was opened in FY06 have even achieved minimum economies of scale.
• CCRI is implementing preemptive capex of INR62b, which will not only further enhance its
competitive advantage, but also allow it to position itself as a total logistics player.
Enjoys inimitable resource advantages
Incorporated in 1988 as a state-owned entity under the Ministry of Railways, CCRI had
the benefit of obtaining Indian Railways’ surplus land at strategic locations at very
attractive long-term lease rates. Till 2006, when private operators were permitted
and licensed to enter the container rail business, it was the monopoly player. CCRI’s
first mover advantage and legacy low cost strategic rail assets give it inimitable
resource advantages over its peers, which are steadily increasing with time.
Key success factors for a container train operator (CTO)
• Extensive pan India asset network of rail terminals / container freight stations
(CFSs) / inland container depots (ICDs) at strategic trade locations
• Relationships with major international shipping lines
• Ability to offer multi-modal services
The nature of the CTO
business is such that
higher volumes can be
captured only if a player
has access to a wide
network to handle and
consolidate freight
Has the largest rail terminal network in India
The nature of the CTO business is such that higher volumes can be captured only if a
player has access to a wide network to handle and consolidate freight. CCRI has ~63
rail terminals at strategic locations across the country. Of these, 18 are pure EXIM
terminals, 33 are combined terminals and 12 are pure domestic terminals. Rail terminal
yards allow consolidation of cargo and enable implementation of the hub and spoke
model. They also enable value addition and drive cost efficiencies.
Setting up a rail terminal is not only capex intensive but also involves the arduous
task of (a) acquiring large contiguous land in close proximity to the railway track for
inland container depots (ICDs) and near ports for container freight stations (CFSs),
and (b) procuring regulatory approvals from the central government and linkages
from Indian Railways. Even six years after 15 private CTOs entered the business, they
have cumulatively set up only ~7 terminals.
Though its competitors have added ~134 rakes, ~55% of CCRI's rake capacity of ~253
rakes, they have failed to capture a proportionate share of volumes or industry profits.
Thus, they have been unable to mimic CCRI's financial success. While there are two
key terminals in the NCR region by GDL (at Faridabad) / Arshiya (at Khurja), that are
slated to get operational by 3QFY13 and another 12-15 terminals at planning/
implementation stage by various other CTO players, none of the competitors are
likely to have the network presence to pose any major challenge to CCRI's dominance
in the medium term.
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